Latest Stories

Tax
practitioners, legislators and taxpayer advocates said the IRS’
announcement that it would no longer require taxpayer requests for
innocent spouse equitable relief under IRC § 6015(f) to be made
within two years of the beginning of collection activity was a long
overdue change.

“It’s
not surprising at all; the sad thing is that this could have been
predicted,” said Carlton Smith, clinical associate professor of law
in the Benjamin N. Cardozo School of Law in New York City and
director of the school’s Tax Clinic. “I think it has been almost
inevitable that there were going to be cases ending up with horrible
fact patterns, mostly involving women, amid compelling circumstances
that would make it almost impossible for the IRS to maintain its
position,” Smith said.

On
Monday, the IRS issued Notice
2011-70, saying it will now consider taxpayer requests for
relief from liability on jointly filed returns under section 6015(f)
at any time consistent with other applicable statutes of limitation.

In
so doing, the Service renounced its long-held position, set out in
Treas. Reg. § 1.6015-5(b)(1), that despite the lack of a statutory
time limit in section 6015(f), the same two-year limit for filing
applies to it as under the provisions for general innocent spouse
relief of section 6015(b) and separation of liability under section
6015(c). Three appellate courts have upheld the rule, although the
Tax Court has several times held the regulation invalid. In the
notice, the IRS said it will remove the two-year limit from the
regulation, and it described how taxpayers may seek relief in the interim.

Smith
credited the work of National Taxpayer Advocate Nina Olson, who, at
least since 2006, has made revising the rule a top priority in her
semiannual reports to Congress on tax policy affecting taxpayers and
taxpayer burdens. Olson issued a statement Monday commending IRS
Commissioner Doug Shulman for stepping in to change the policy, as
well as local advocates in the Taxpayer Advocate Service, taxpayers
and members of Congress who advocated the change.

In
an IRS news release, Shulman said the need for the change had become
clear to him in recent months.

"This
change is a dramatic step to improve our process to make it fairer
for an important group of taxpayers,” he said. “We know these are
difficult situations for people to face, and today’s change will
help innocent spouses victimized in the past, present and the future."

The
IRS said in the notice it would take appropriate action consistent
with the notice with respect to pending litigation. On Monday,
citing the notice, a government lawyer filed a request for a
dismissal of a case in the Second Circuit Court of Appeals of
Heather L. Coulter (docket no. 10-680), for whom Smith is
co-counsel. Smith said he expects similar action will be taken in
pending cases in several other circuits and in the Tax Court, where
the most recent circuit court win by the IRS has been remanded.

Smith
said he estimates, based on inquiries by Olson—the IRS does not
track the number—that the IRS receives about 50,000 innocent spouse
requests annually, of which Monday’s change affects probably about
2,000 each year.

In
April, 49 U.S representatives led by Reps. Pete Stark, D-Calif., and
Jim McDermott, D-Wash., wrote
Shulman to urge the review that led to the change. In addition,
Senate Finance Committee chairman Max Baucus, D.-Mont., and
committee members Tom Harkin, D-Iowa, and Sherrod Brown, D-Ohio,
also wrote
to Shulman in April asking for the IRS review. In a press
release, Rep. McDermott called the IRS's decision “a victory for fairness.”

Also
in April, Reps. Michele Bachmann (R-Minn.) and Michael Fitzpatrick
(R-Pa.) reintroduced a bill to revise section 6015(f) to say that a
request under it carries no time limit.